EMEA Industrial Investment At Highest Level For Five Years

Capital continues to flow into Industrial and Logistics real estate, with investment volumes rising 4.6% in Q3 2013, and nearly 40% on the same period last year, according to the latest research from global property advisor CBRE.

The European industrial and logistics market has attracted just over €10 billion worth of investment to date in 2013, surpassing the full year total for each of the past four years. There was once again significant transaction activity in the UK, Germany, France and the Netherlands. Prime yields have edged down in some markets, most notably in the UK.

James Markby, Head of European Industrial & Logistics Investment, commented:

“The entry of predominantly North American private equity funds has injected liquidity into a market that offers attractive risk-adjusted returns secured against diversified income streams. We are also seeing the re-entry of institutional players seeking to access the light industrial market to enhance their distribution yields. Investors are also taking advantage of a pronounced improvement in secondary industrial values across the major European markets.”

The European economic background continues to slow the decision process for industrial and logistics development projects. This is exerting upward pressure on rents at the prime end of some markets, as well as keeping vacancy rates for good stock low. As a result, there are some cases of new stock coming to market in Central and Eastern Europe (CEE) and being absorbed immediately. In Moscow, 526,000 sq m of warehouse space was delivered in Q3 2013, and another 207,000 sq m is expected to complete in Q4 2013, with 90% of this pre-let. Prague also saw the highest level of completions since Q2 2009.

Leasing activity in the industrial and logistics sector in Q3 2013 was similar to the first half of the year, but with notable increases in some markets. There was strong activity once again in Moscow and Dublin, but also the Lille region in France and the regional Czech Republic markets. Consolidation and relocation of occupiers into prime space is continuing to drive demand across EMEA. Overall, take-up was down a little on Q2 2013, and is running below the four quarter rolling average. As a result, 2013 is likely to be down on 2012 levels. Headline rents edged up on the quarter and the year by 0.64%, as increases were seen in Oslo, Glasgow, the Hague and Dubai.

Amaury Gariel, Head of EMEA Industrial and Logistics, CBRE, commented:

“The near term outlook for the industrial and logistics sector appears stable and is generally more upbeat than six months ago. The expansion of e-commerce by retailers is one segment of the market in particular that is showing sustained growth, generating demand for both parcel delivery centres and large distribution warehouses. Demand for warehouse space in western Europe is being driven by the desire to improve supply chain networks with the ultimate goal of boosting profits, while in eastern Europe demand is the result of long-term growth plans through the expansion of store networks.”

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